Right, but what is the upside of using XXX->BTC->YYY instead of XXX->USD->YYY? In the instances where there is no liquid market of XXX or YYY to USD, it is high

Right, but what is the upside of using XXX->BTC->YYY instead of XXX->USD->YYY? In the instances where there is no liquid market of XXX or YYY to USD, it is highly unlikely that there will be a liquid market of XXX or YYY to BTC. If conversion between XXX and USD is illegal, then BTC is essentially being used to avoid local laws, and falls under the "illegal" category the author described. BTC would be a great intermediary currency if there wasn't one already in the form of USD. I just don't see any advantage that BTC would offer over USD, even in the presence of high levels of BTC liquidity (assuming nothing catastrophic happens to the USD, of course).